how to survive a market crash and make money doing it (Featuring @themarkethustle)
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how to survive a market crash and make money doing it
(Featuring @TheMarketHustle)
The past 5 months have been chaotic in the stock market.
The market is currently full of fear and uncertainty, which always results in market turbulence and volatility.
Although market crashes are completely normal, they aren't always easy to deal with emotionally.
Especially if you are brand new to investing.
It's interesting to me how everyone views a 20%+ market drop as a great investment opportunity when looking back in time, but panics when those drops occur in real-time (like right now).
This is due to the "uncertainty" factor.
Everybody can look back at previous crashes (2000 tech bubble, 2009 financial crisis, 2020 pandemic crisis, etc.) and say:
"Wow, that was such a great buying opportunity! Why didn't people buy more instead of panic sell?"
And the reason why is because for those big drops to actually occur, most investors have to be in panic mode.
Stocks won't fall unless more people are selling stocks rather than buying.
Another important thing to note: Future millionaires are made or destroyed in bear markets.
A bear market is when stocks are in a consistent downtrend and a bull market is when stocks are in a consistent uptrend.
What you do (or don't do) in bear markets can determine your financial future.
Just like bull markets eventually become overly optimistic. Bear markets eventually become excessively pessimistic. But that pessimism creates excellent investment opportunities for long-term investors who continue to buy stocks on sale.
The funny thing is that 5-10 years from now, a lot of people will look back on 2022 and wish they would have invested more. It happens every time stocks fall.
The buying opportunities are never apparent until well after the fact.
Don't get me wrong; I'm not declaring we have reached the bottom of this current market crash. Stock can continue falling and nobody can accurately predict the bottom.
What I'm trying to say is that crashes are normal and part of market cycles.
For example, look back to the 2000, 2008, and 2020 market crashes.
The stock market plummeted to record lows during those crashes but jumped back to all-time highs a few years later. I don't expect this current crash will be any different.
But that doesn’t mean stock market crashes are easy to deal with emotionally.
It’s easy to say you’re a long-term investor when the stock market is pumping and everybody is making profits.
But building long-term wealth requires you to also deal with the inevitable market declines and the mass fear that comes with them.
It’s moments like right now that test how good of an investor you are. Investing is a psychological game. The critical point to remember is that markets operate in cycles.
This is also why you don't want to follow what the masses are doing.
Most people will buy at the top of the market due to greed and sell at the bottom due to fear.
There will be periods where most people are highly optimistic about the future of the stock market and periods where they will be extremely pessimistic.
Successful investors do their best to stay away from both extremes and focus on continuing to buy great assets and holding them for the long run.
Another key point: You also have to buy stocks/funds that will survive the inevitable market crashes.
That's why I'm a big fan of investing in QQQ and VOO. I'm essentially investing in the entire U.S. economy when buying these funds. As long as the U.S. economy continues to trend upward over the long run, so will those funds, and so will my wealth.
The best way to invest is to continuously buy great stocks/funds every time you get paid and to ignore short-term market noise.
Dollar-cost averaging (DCAing) into quality assets is one of the best strategies you can do.
Time in the market always beats trying to time the market.
One last point: The faster an asset goes up when the market pumps, the faster it will go down when the market inevitably dumps. Volatility works both ways.
Growth investors are finding this out the hard way right now. Everybody loves risky assets on the way up but won't touch them with a 10-foot pole on the way down.
I hope this issue helps calm your emotions during these turbulent times.
The best way to survive a market crash is to keep your emotions out of your portfolio.
Try your best to view this current crash as a sale, because that's exactly what it will be later on down the road.
Who is the person behind The Market Hustle? 🤷♂️
My name is Josh and I started The Market Hustle back in 2017 with the mission of simplifying money concepts to make personal finance less intimidating.
Wall Street loves to overcomplicate things to make themselves the gatekeepers of wealth building, I’m here to give you another perspective.
I graduated from W.P. Carey School of Business and worked in the Real Estate industry before jumping full-time into building my own personal finance education business.
I have been investing for around 9 years now and my goal with these posts is to share everything I wish I would've been told before investing.
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As Always: Buy things that pay you to own them.